What are the loan options for non-salaried persons?

While personal loans have become popular, they are restricted to salaried people. But what about those who do not have a guaranteed source of income? For them, here are some other credit options.

Loan against credit card

Loans against credit card are pre-approved loans which the bank lends you up to a certain percentage of your credit card limit. They usually require no or minimal documentation and are disbursed within a few minutes. All you need to do is call the customer care of your credit card provider or apply online. The interest rate charged may be a bit higher than personal loans, usually by 1-2.5%, depending on the type of credit card and customer’s profile. The quantum of loan depends upon the credit card limit utilised by the borrower. However, some lenders may grant loan over and above the credit limit if they are confident of your repayment capacity.

Many individuals confuse loan against credit card with cash withdrawal through credit cards. The two are completely different. The interest incurred on cash withdrawals is extremely high and should be avoided unless there is an emergency. Also, remember the credit limit on your credit card will be reduced by the loan amount and it will increase as and when you keep repaying the loan amount.

Gold loan

Gold loans have been a popular source of funds, since most households have invested in gold. Since the loan amount usually depends upon the gold’s value and not the repayment capacity of borrower, it often comes to the rescue during urgent monetary needs. They are disbursed quickly with minimum documentation and with little eligibility criteria. However, their tenures are shorter, with the maximum period being up to three years generally. While taking the gold loan, make sure you have enough savings or investments which can be redeemed to pay off the loan’s EMIs timely. In case you fail to do so, the lender will keep your collateral till the entire repayment is complete.

Loan against property

Loans for both business as well personal purposes can be availed against collateral in the form of residential or commercial properties. The loan amount disbursed is a percentage of the property’s value and depends upon loan to value (LTV) ratio which the lender provides. Loan against property are secured loans and thereby, the interests aren’t usually very high and the loan tenure may go up to 15 years. The loan amount depends on the type of property, customer’s record, LTV offered by lender, etc. Since loans against properties generally involve large amounts, make sure you repay the loan timely, as the lender has the authority to possess the property provided as collateral, and sell it to get his dues.

Loan against securities

Lenders provide a list of approved securities which can be pledged to take loan against them. These securities include demat shares, mutual funds units, term deposits, listed bonds, provident fund, etc. These loans involve an overdraft facility allowed on a current account with the borrowing limit set based upon the value of collateral provided. Borrower can withdraw from this account and also repay by depositing the amount back. Since the interest is only charged on the basis of outstanding balance in the account at the end of the month, loans against securities is usually cheaper than personal loans. As these loans involve various securities, make sure the security you are pledging is in the list of approved securities of the lender.